By Lynn Thomasson
March 27 (Bloomberg) -- U.S. stocks retreated, trimming a third-straight weekly gain, as the heads of JPMorgan Chase & Co. and Bank of America Corp. said results deteriorated in March and lower oil and metal prices dragged down commodity producers.
JPMorgan and Bank of America lost at least 3.2 percent, reducing this month’s rally in financials triggered when the banks said they made money in January and February. Schlumberger Ltd. and Hess Corp. slid more than 4 percent following a Goldman Sachs Group Inc. report predicting lower oil prices. Accenture Ltd. tumbled 13 percent, the most since the company went public in 2001, after the technology-consulting firm cut its forecasts.
The Standard & Poor’s 500 Index lost 2 percent to 815.94. The gauge is up 11 percent in March, poised for its best month since 1991. The Dow Jones Industrial Average decreased 148.38, or 1.9 percent, to 7,776.18. The Nasdaq Composite Index retreated 2.6 percent to 1,545.2. Seven stocks fell for each that rose on the New York Stock Exchange.
“You’ve got a lot of fear going into earnings,” said John Nichol, who manages $1 billion in Pittsburgh including the Federated Equity Income Fund, which has beaten 74 percent of its peers over the past five years. “You need growth and there’s just not a lot of growth right now.”
Alcoa Inc., traditionally the first Dow average company to release results, will kick-off the first-quarter earnings season on April 7. Analysts polled by Bloomberg estimate profit during the period slumped 36 percent on average for S&P 500 companies as the recession wiped out consumer spending.
All 10 industries in the S&P 500 fell today as a measure of consumer confidence held in March near a three-decade low.
Rebound Trimmed
The slump today reduced the S&P 500’s gain from a 12-year low on March 9 to 21 percent. The stock benchmark advanced 6.2 percent this week as the Treasury unveiled a plan to revive credit markets by helping investors buy toxic assets and companies from Best Buy Co. to ConAgra Foods Inc. beat analysts’ profit estimates.
JPMorgan dropped 5.8 percent to $27.40. Chief Executive Officer Jamie Dimon said “March was a little tougher” than January and February. Bank of America lost 3.2 percent to $7.34. CEO Ken Lewis said the bank’s trading book in March was “not as good as in the previous two months. Both executives spoke in interviews with the CNBC television network.
The S&P 500 Financials Index retreated 3.5 percent, trimming its rebound from a March 6 low to 51 percent, as Democrats in the U.S. House of Representatives recommended legislation to curb “predatory” lending and encourage the use of traditional 30-year, fixed-rate loans.
‘More to Come’
The new rules would prohibit banks from “directly or indirectly” hedging or transferring a minimum retained credit risk on most nontraditional mortgages, including some loans that have adjustable interest rates or require little documentation of a borrower’s income.
“While we have had a great deal of bad news on banks, we think there is still more to come,” said Goldman Sachs strategist Abby Joseph Cohen in a Bloomberg Radio interview from New York. “We’re certainly not yet in the clear -- whether in the U.S. or around the world.”
The banking industry had its first loss in derivatives trading last year, driven by a fourth-quarter $9 billion rout in credit markets. U.S. commercial banks lost $836 million in 2008 from trading over-the-counter cash and derivatives contracts, compared with a $5.5 billion gain in 2007, the Office for the Comptroller of the Currency said in a report today.
Energy Slump
Schlumberger, the world’s largest oilfield-services provider, dropped 4.4 percent to $43.52. Hess slumped 8.4 percent to $58.23. Crude oil declined 3.7 percent to $52.35 a barrel on the New York Mercantile Exchange, paring its sixth weekly increase.
Accenture tumbled 13 percent to $27.66. The second-biggest technology-consulting firm cut its profit and sales forecasts as the worsening economy curbed spending on computer equipment.
A measure of technology shares in the S&P 500 dropped 2.7 percent, the most in three weeks. The industry remains the S&P 500’s best performer this year with a 4.9 percent advance.
Amazon.com Inc. fell 4.3 percent to $70.52. The world’s largest Internet retailer was removed from the “conviction buy” list at Goldman Sachs because the shares are no longer cheap.
‘Headwinds’
“There are still plenty of headwinds out there to concern equity investors,” said Michael Koskuba, a New York-based fund manager at Victory Capital Management Inc., which oversees $50 billion. “Given the sharp rally we’ve seen, it makes sense for the market to sell off a bit.”
The U.K. economy contracted 1.6 percent in the fourth quarter from the third quarter, exceeding the prior measurement of 1.5 percent, which was also the median forecast of 27 economists in a Bloomberg News survey. Europe’s Dow Jones Stoxx 600 Index slipped 1.1 percent.
The MSCI Asia Pacific Index closed little changed after paring gains that drove valuations to the highest levels since December.
The Reuters/University of Michigan final index of consumer sentiment rose to 57.3 from 56.3 in February. The gauge, which has averaged 112 over the last three decades, reached a 28-year low of 55.3 in November.
Economy Watch
Growth in spending by U.S. shoppers slowed in February and incomes fell more than forecast amid the deteriorating job market, the Commerce Department reported. Bed Bath & Beyond Inc., Starbucks Corp. and Harley-Davidson Inc. fell more than 4 percent, leading the S&P 500 Consumer Discretionary Index to a 2.1 percent loss.
Rising unemployment raises the risk that recent increases in purchases will be short-lived, extending the recession though much of 2009. Still, other economic reports this week showed the economy is stabilizing as home sales and demand for longer lasting products, such as refrigerators, airplanes and computer chips, unexpectedly grew in February.
General Motors Corp. jumped 6.2 percent to $3.62 for the biggest gain in the Dow average. The largest U.S. automaker hired Commerzbank AG to find an investor for its Opel unit in Europe, two people familiar with the matter said. The sale would be part of the company’s plan to raise as much as 3.3 billion euros ($4.5 billion) in Europe, according to one of the people, who declined to be identified because details of the plan aren’t public. Spokesmen for Commerzbank and GM declined to comment.
Short Interest
The number of shares borrowed and sold short on the New York Stock Exchange jumped to 16.1 billion on March 13, the most since Lehman Brothers Holdings Inc. filed for bankruptcy, NYSE Euronext reported earlier this week.
The so-called short interest was boosted by an almost fivefold increase in bets against Citigroup Inc. between Feb. 27 and March 13 as speculators sold its common stock short and purchased its convertible securities before they are eligible to swap. Shares of the New York-based bank have rallied 75 percent since Feb. 27.
The S&P 500 is still down 9.7 percent this year after tumbling 38 percent in 2008, its worst annual return since the Great Depression. The MSCI World has dropped 10 percent in 2009 after last year’s 42 percent plunge, the biggest since the index was created in 1970.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
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